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events.cbinsights.com
DEMO DAY
4#FutureFintech
s
@
s
June 11 - 13, 2019
New York, NY
events.cbinsights.com/future-of-fintech
Fintech mega-rounds continued in Q4’18, while IPO activity is likely to
remain lackluster in 2019: 2018 saw a whopping 52 $100M+ financing
deals to VC-backed fintech companies – including 14 in Q4’18 worth $3.8B.
Asia made a run at the US as the top market for fintech with a surge in
early-stage and mega-round investments: Asia saw the biggest boost in
deals, growing 38% YOY and a record level of funding raising
$22.65B across 516 deals. Political and trade war tensions may have
caused some of the pull back in H2’18, but 2019 could see Asia overtake
the US.
The US remained the top market for deals with 659 investments worth
$11.89B funding, both a new annual high: Europe saw a pull back in deals
to 367 deals but funding topped $3.53B, an annual record.
South America reached a turning point in the eyes of investors in 2018,
despite political turmoil across the region: South America saw funding top
$540M across 55 deals, both a new annual record. In H2’18, investors
started to pull back in the region as social, political, and monetary conflicts
struck the region. Despite strain, Brazil-based NuBank, became South
America’s first unicorn and closed out 2018 with a $90M investment from
Tencent.
Note: Report focuses on all equity rounds to VC-backed fintech companies. This report does not cover
companies funded solely by angels, private equity firms, or any debt, secondary, or line of
5
credit
transactions. All data is sourced from CB Insights.
Summary of findings
2018 VC-backed fintech deals and funding set an annual record: In 2018,
VC-backed fintech companies raised $39.57B across 1,707 deals globally.
Deals were up 15% year-over-year while funding surged 120% on the back of
52 mega-rounds ($100M+) worth $24.88B combined.
Fintech is happening on global scale with deals outside of core markets
(US, UK, and China) accounting for 39% of deals: Fintech deal hubs are
starting to emerge globally. The count of unique fintech startups raising
funding topped an annual high of 1,463 companies, and the unique number
of investors reached 2,745 boosted by an influx of corporate investors.
Early-stage deals, as a percentage, fell to a 5-year low as investors
concentrated bets in perceived winners: Global seed and Series A fintech
deals grew 5% on an annual basis in 2018, but fell as a percentage of total
deals to 57%. US early-stage deals were flat YOY as investors concentrated
their bets in established fintech unicorns.
There are 39 VC-backed fintech unicorns worth a combined $147.37B:
Q4'18 saw five new unicorns births (Plaid, Brex, Monzo, DevotedHealth, and
Toss) and two in the first month of Q1’19 (N26 and Confluent). The
cohort’s total valuation in 2018 was boosted by a record year for mega-
rounds to existing unicorns, including Gusto and Robinhood, among others.
6
Contents
8 2018 Financing Trends
Annual Deals & Dollars
Regional Trends
Fintech Unicorns
9 0 Appendix:
2018 Top VC-Backed Fintech Deals
2018 Most Active Fintech Investors
2 1 2019 Trends To Watch
How we did in 2018
What to watch for in 2019
Where investors are placing bets in fintech
Which markets will see fintech emergence
How incumbents will act
7
LENDING
BLOCKCHAIN/
CRYPTO
REGTECH
PERSONAL
FINANCE
PAYMENTS/
BILLING
MONEY
TRANSFER/
REMITTANCES
WEALTH
MANAGEMENT
CAPITAL
MARKETS
MORTGAGE/
REAL ESTATE
INSURANCE
2019 FINTECH
TRENDS REPORT
Marketplace lending & alternative
underwriting platforms
Payments processing, card developers,
& subscription billing software tools
Tools to manage bills and track
personal and/or credit accounts
Audit, risk, and regulatory
compliance software
Companies leveraging blockchain
technologies for financial services
Companies selling insurance digitally or providing
data analytics and software for (re)insurers
Sales & trading, analysis, and infrastructure
tools for financial institutions
Investment and wealth management
platforms and analytics tools
International money transfer
and tracking software
Mortgage lending, digitization,
and financing platforms
WHAT THIS REPORT COVERS
8
First, a look at what happened in 2018…
1. Global fintech financing hit a new record
2. Early-stage fintech deal activity slowed down
3. 16 new fintech unicorns were birthed
9
$8.34 $16.30 $19.29 $18.00 $39.57
885
1,153
1,254
1,480
1,707
2014 2015 2016 2017 2018
Global fintech investment tops $39B in 2018
Annual global fintech deals and financing, 2014 – 2018 ($B)
F I N T E C H D E A L S A N D F U N D I N G S O A R T O N E W R E C O R D S
10
$1,728
$1,979
$1,393
$3,236
$2,694
$4,977
$6,351
$2,280
$5,405
$8,455
$2,905
$2,525
$3,204
$5,737
$4,570
$4,501
$5,977
$20,526
$6,039
$7,033
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
Ant Financial’s $14B investment accounted for 35%
of total funding in 2018
$4,500
$14,000
11
192
210
237 246
260
292
331
270
337
315 304 298
365
385
366 364
426
441 440
400
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
VC-backed fintech deals declined in Q4’18 but
remain above 2017 levels
Q 4 ’ 1 8 S A W A T H R E E - Q U A R T E R L O W F O R G L O B A L V C - B A C K E D F I N T E C H D E A L S
12
$5,923 $9,125 $6,267 $8,673 $12,415
$1,114
$5,028
$6,842
$6,203
$8,648
$1,198
$2,009
$1,377
$2,843
$3,525
$22
$103
$69
$343
$202
$540
2014 2015 2016 2017 2018
North America is no longer powering global
fintech funding growth
Global VC-backed fintech funding by continent, 2014 – 2018, ($M) (*Ant Financial excluded)
*Ant Financials' $14B round in Q2’18 was excluded from the chart represented on this slide for illustrative purposes
Africa
376% YOY
South America
Europe
24% YOY
Asia
265%* YOY
North America
43% YOY
167% YOY
Australia
396% YOY
13
Deals grew in every market except Europe in 2018
Global VC-backed fintech deals by continent, 2014 – 2018
Note: Charts not to scale
553
629 622
643
717
156
256
318
373
516
144
234 262
371
367
2014 2015 2016 2017 2018
North America Asia Europe
3
6
7
17
27
16
10
21
23 25
13
18
24
53
55
2014 2015 2016 2017 2018
Africa Australia South America
14
67% 65% 64% 62% 57%
17% 19% 18% 18%
21%
8% 7% 6%
7% 6%
8% 9%
12% 13%
16%
2014 2015 2016 2017 2018
Early-stage fintech deal share falls for the 5th year
Annual deal share by stage to global VC-backed fintech companies, 2014 – 2018
Mid-Stage
Early-Stage
Late-Stage
Other
1515
39 FINTECH UNICORNS
$147.37 BILLION
G L O B A L L Y T H E R E A R E
V A L U E D , I N A G G R E G A T E , A T
16
SWEDEN
EUROPE
$5.3B
$1.6B Valuation $2.0 - $2.5B
$8B
$1.24B $1B
$1.2B
SOUTH AMERICA
$4B Valuation
BRAZIL
NORTH AMERICA
$20.3B Valuation
$3.2B
$3B
$4B$1.8B
$1.9B $10B
CHINA
INDIA
ASIA
$1.4B
$38B Valuation
$1B
$1.5B
$1B
$2B $2.1B (as of Q2’15)
$1B$1.2 - $1.6B
$1.4B $1B
$3B
39 fintech unicorns valued at $147.37B
Global VC-backed fintech companies with a private market valuation of $1B+ (1/25/19)
UNITED KINGDOM
$1.7B
$1.6B
$1.1B
$1.2B
$1.1B$1.8B
$2.7B
$1.27B
SOUTH KOREA
UNITED STATES GERMANY
$2.7B (as of Q1’19)
$1B $4.49B (as of Q1’17)
$2.5B (as of Q1’19)
17
SWEDEN
EUROPE
$5.3B
$1.6B Valuation $2.0 - $2.5B
$8B
$1.24B $1B
$1.2B
SOUTH AMERICA
NORTH AMERICA
$20.3B Valuation
$3.2B
$4B$1.8B
$1.9B $10B
ASIA
$1.4B
$38B Valuation
$1.5B
$1B
$2B $2.1B (as of Q2’15)
16 fintech unicorn births in 2018
Global VC-backed fintech companies with a private market valuation of $1B+ (1/25/19)
GERMANY
$2.7B (as of Q1’19)
$1B $4.49B (as of Q1’17)
$2.5B (as of Q1’19)
UNITED STATES UNITED KINGDOM
$1.7B $1.27B
CHINA
$1.2B
SOUTH KOREA
$3B
$1B$1.2 - $1.6B
$1.4B $1B
$3B
$1.1B$1.8B
$2.7B
INDIA
$1B
$1.6B
$1.1B
$4B Valuation
BRAZIL
18
5
18
8
21
25
3
11
10
12
18
7
1 1
2014 2015 2016 2017 2018
North America Asia Europe South America Australia
2018: 52 fintech mega-rounds total $24.88B
Global number of fintech mega-rounds ($100M+), 2014 – 2018
G R O W T H I N V E S T I N G I N F I N T E C H H I T A P E A K I N 2 0 1 8
19
17% 21% 26% 28% 33%
83%
79%
74% 73%
67%
2014 2015 2016 2017 2018
Corp / CVC Participation Other Investors
A third of global fintech deals include a CVC
N U M B E R O F F I N T E C H I N V E S T O R S D O U B L E S I N C E 2 0 1 4
Number of investors in a fintech startup reached
a new high in 2018
2014 – 2018
Corporate and CVC participation in fintech saw a
new annual high
2014 – 2018
1,349
1,779
1,973
2,327
2,745
2014 2015 2016 2017 2018
20
Traditional hubs no longer power fintech growth
F I N T E C H D E A L S S H I F T A W A Y F R O M C H I N A A N D T H E U S
Count of fintech startups raising funding hit an
annual record in 2018
2014 – 2018
745 990 1,077 1,247 1,463
2014 2015 2016 2017 2018
Deals are shifting away from core fintech hubs
2014 – 2018
73% 68% 61% 59% 61%
27%
32%
39% 41% 39%
2014 2015 2016 2017 2018
Deals in China, UK, US Deals Outside Core Markets
#AhaCBI
2019 Fintech
Trends
22
B U T F I R S T … H O W D I D W E D O O N O U R 2 0 1 8 F I N T E C H T R E N D S T O W A T C H ?
2018 TREND TO WATCH KEY DEVELOPMENTS HOW WE DID
1. Fintech unbundling leads to rebundling • Rebundling had a false start in 2018, as startups
underestimated the time to market and regulations
• In 2019, the battle for millennial deposits will become more
aggressive as fintech account products hit the market
2. European fintechs will expand their
global footprint
• Digital-first banks flourished in Europe under tech
favorable regulations and funding environment
• Monzo, Revolut, and N26 became unicorns and, though
none went live, all established US operation plans for 2019
3. Banks forgo partnering in favor of
fighting fintech with fintech
• Goldman Sachs was the most active in investing
and building out fintech with retail bank Marcus
• Many incumbents made valiant attempts to build and
launch fintech competitors, but most missed on adoption
4. Wealth management will become the
hottest fintech sector in China
• Asia cracked down on alternative lenders to tighten
credit as defaults surged
• Lufax and Ant Financial raised over $15B in funding as
China’s broader fintech landscape consolidates
5. Latin America and Southeast Asia will
see strong fintech growth
• Both Latin America and South East Asia fintech
deals and funding hit annual highs in 2018
• Under pressure, Latin America may see funding cool off
while Southeast Asia is likely to continue to grow in 2019
6. More companies will look to sell
pickaxes amid cryptoasset speculation
• Cryptocurrencies were strained as regulators
globally ironed out regulation and guidance
• ICO frauds created speculation and detoured retail
investors however, equity investments rebounded
7. Capital markets fintech infrastructure
becomes a focus area for investment
• Plaid became the first infrastructure unicorn and
started 2019 by acquiring competitor Quovo
• 2019 will see more consolidation in infrastructure focused
companies under fee-compression in the industry
8. Banks deepen their partnerships with
regtech
• Marquee regulations were implemented creating
demand for regtech but adoption trailed
• Regulators promoted tech adoption and, in 2019, will look
to guide banks through integrating with core infrastructure
9. Insurance tech investment moves to
the back-end
• Mega-round investments were spread out among
full-stack insurers and intermediaries
• Consolidation in insurtech make take form in 2019 as VC
early-stage startups fail to show enough market traction
10. Amazon is primed to get more
aggressive in fintech — outside of the US
• Rumors swirled that Amazon was partnering with
JPM or Capital One to launch bank accounts
• Amazon picked up fintech investments in India, a key
growth market for the e-commerce giant
23
1. The battle for deposits
2. Fintech firms up focus on regulatory compliance
3. Southeast Asia sees hotbed of fintech activity
4. The next Ant Financial & WeChat Pay
5. Unbundling the paycheck
6. New investment platforms and asset classes
7. Fintech meets real estate
8. Rise of impact fintech
9. Lack of fintech M&A by banks continues
10. No-go for fintech IPOs
2 0 1 9 T R E N D S T O W A T C H
2424
The battle for deposits
# 1 F I N T E C H R E B U N D L I N G G E T S M O R E A G G R E S S I V E
25
Fintech firms look for their second act
Fintech firms are becoming more aggressive in expanding their lines of business beyond their initial use case
B U Y I N G B U I L D I N G P A R T N E R I N G
+
+
Affirm debating move into savings
accounts next January 9, 2019
NuBank receives regulatory approval to
launch NuCanta bank accounts
April 2018
Revolut hires CTO to head up wealth
management and trading division
January 9, 2019
+
26
S A M E G O A L , D I F F E R E N T E N T R Y P O I N T
Fintech moves from mono-line to multi-line
FIRST
BEACHHEAD
DIGITAL WALLET ROBO-ADVISOR MICRO-INVESTING BROKERAGE PERSONAL FINANCE CRYPTO
NEXT PILLAR
BANK ACCOUNTS
REAL ESTATE
COLLEGE SAVINGS
BROKERAGE
LENDING
INSTITUTIONAL
INVESTING
CRYPTOWEALTH
MANAGEMENT
BANK ACCOUNTS
CRYPTO WEALTH
MANAGEMENT
LENDING
BANK ACCOUNTS
INDEX INVESTINGMARGIN INVESTING
Fintech startups are rebundling products and services ahead of their maturing customer base
WEALTH
MANAGEMENT
BANK ACCOUNTS
27
Banking-as-a-service platforms facilitate US
fintech companies to expand to bank accounts
NOTABLE PARTNERS NOTABLE PARTNERS
Green Dot uses its own bank, Green Dot Bank, and what it calls its
banking-as-a-service platform to offer mobile banking capabilities to
third party providers.
In April 2018, StoneCastle Partners and Q2 Holdings announced the
launch of Cambr, merging Q2’s digital platform CorePro and
StoneCastle’s digital deposit network of 800+ community banks and
relationships with banks of record.
28
Abroad, fintech firms are looking to build their
own chartered banks
Fintech startups that want to replace the old guard of
banking are leveraging regulatory tailwinds and
applying for charters and licenses with respective
regulators.
Regulators globally have been lowering the barriers for
tech startups to enter the market as a way to break up
banking monopolies and stimulate competition.
The FCA was among the earliest to pilot limited
licenses like the “e-money license” that enabled tech
entrants like Revolut to launch a remittances business
through initially partnering with a chartered bank, that
decreased the company’s time to market. Revolut
obtained a charter in 2018 and has been applying the
same playbook to expand globally.
29
The battle for distribution will start with deposits
By attaining a customer’s paycheck,
fintech challengers are able to make
money on interest, and more importantly,
set themselves up for future product
innovation. If a customer’s money
is already being deposited in an app,
introducing new products — such as
savings and investment accounts — can
be seamless.
Debit cards are often fintechs’ first cross-
over product because the service
adds another product and revenue stream.
Fintechs are also able to receive
significantly higher interchange fees than
traditional banks as a result of the Durbin
Amendment, which limits the fees stores
pay banks when customers make
purchases with debit cards.
3030
# 2 R E G U L A T O R S B E C O M E M O R E E M B O L D E N E D
Fintech firms up focus on
regulatory compliance
31
Emboldened regulators globally are…
2 0 1 9 R E G U L A T O R Y D R I V E R S
C R A C K I N G D O W N O N B A D
A C T O R S
As startups look to launch new products, it
will be essential for fintech challengers
(and incumbents) to continue to build
inroads with regulators to avoid
roadblocks.
C O L L A B O R A T I N G A N D
S P R E A D I N G I N N O V A T I O N
Regulators globally have been actively
promoting innovation and embracing tech to
break up local banking monopolies.
Regulatory support has lowered the barriers
for startups to enter markets.
1 2
32
Regulators are upping oversight on bad actors,
issuing massive “unicorn” level fines
Fines include non-compliance with AML, KYC, and sanctions, and exclude crisis-related settlements, ($M)
Final figure pending Reported final figure
$15
$54
$135
$145
$205
$369
$534
$575
$613
$900
$1,000
$1,340
$1,600
$7,500
$8,000
UBS
BNY
JP Morgan
UBS
Deutsche Bank
Rabobank
CBA
Wells Fargo
US Bank
ING
Wells Fargo
Société Générale
Standard Chartered
Goldman Sachs
Dankse Bank
33
Regulators are increasing their scrutiny of high-
profile consumer fintech challengers
VS.12:21PM
9:45AM
Within 24 hours
973,233
“Checking & Savings”
Now “Cash Management”
1 DayDecember 13, 2018
1 Week
1 Month
3434
“I disagree with the statement that these funds are
protected by SIPC. Had they called us, I would have
told them what I just told you in that
I have serious concerns about this. This has
gigantic ramifications for the banking industry.”
-Stephen Harbeck
President & CEO, SIPC
A L S O W I T H I N 2 4 H O U R S
35
Brazil cuts interest rates to new record low
of 6.5%
March 21, 2018 |
But regulators have also lowered barriers
R E G U L A T O R S O P E N T H E D O O R F O R F I N T E C H
36
As tech startups take advantage of open banking
access, they will need in-house regulatory teams
LATIN AMERICA
CANADA
AFRICA
• OCC explores a “fintech charter”
• OCC issues conditional banking charter
UNITED STATES
• In Jan’19 the FCA reported 80 TPPs registered
• As of Sept’18 there were 17.5M monthly open API calls
• Both the EU’s revised payment services directive (PSD2) and
UK’s Open Banking went live
• Brazil’s central bank issues new banking rules
• Chile regulators follow Brazil’s lead
• The Hong Kong Monetary Authority
drafted open API frameworks
• HKMA starts issuing virtual bank
guidance and licenses
• The Department of Finance Canada
launches Advisory Committee on Open
Banking and open call for input
• Australia Securities and Investment
commission (ASIC) openly endorsed
open banking guidelines
• Open Banking put on hold in Jan’18 by
the federal government
MEXICO
• Mexico passes “Fintech Law” and requires
banks to establish open APIs
• Nigeria set up an Open Technology Foundation, a not-
for-profit industry group developing open API standards
• South Africa Reserve Bank (SARB) started researching
the establishment of a a regulatory sandbox
EUROPE
ASIA
AUSTRALIA & NEW ZEALAND
3737
Southeast Asia sees hotbed of
fintech activity
# 3 S T A R T U P I N V E S T M E N T M O V E S F R O M C O M M E R C E T O F I N T E C H
38
Fintech in Southeast Asia is heating up with record
year for deals and funding, up 143% YOY
$9.66 $173.39 $114.31 $199.42 $484.71
19
38
57
54
68
2014 2015 2016 2017 2018
39
Southeast Asia fintech startups are attracting
bigger financings and foreign investors
Last Round: $40M Series D in Q1’19
Sector: E-commerce installment
lending
Investors: Ant Financial
Last Round: $24M Series B in Q3’18
Sector: OS services for SMBs
Investors: Sequoia Capital, East Ventures,
Convergence Ventures
Last Round: $28M Series C in Q3’18
Sector: Financial services comparison
Investors: Experian Ventures, Telstra
Ventures, Korea Investment Partners
Last Round: $100M Series C in Q1’19
Sectors: Digital wallet and payments
Investors: Warburg Pincus
Last Round: $2.4M Series A in Q1’18
Sector: Financial services comparison
Investors: B. Grimm, European Venture
Partners
Last Round: $40M Corporate Minority in Q4’18
Sectors: Digital wallet and remittances
Investors: KKR, Tencent, IFC
40
Ant Financial is becoming more aggressive in
expanding its reach in Southeast Asia
THAILAND
PHILIPPINES MALAYSIA
INDONESIA
PARTNERING LOCALLY TO EXPAND MOBILE PAYMENTS LOOKING FOR STRATEGIC INVESTMENTS IN OTHER
FINANCIAL CATEGORIES
CAMBODIA
VIETNAM
41
Ride-hailing platforms may end up as biggest
fintech winners in Southeast Asia
BUILD
BUY
PARTNER
4242
The next Ant Financial & WeChat
Pay
# 4 I N T E R N E T P L A T F O R M S G L O B A L L Y E X P A N D I N T O P A Y M E N T S
43
QR codes are the entry point to digital payments
44
Alipay and WeChat Pay are leading China’s
transition to a cashless economy
45
Fintech is powering the growth of MercadoLibre in
Latin America
Leading Latin American e-Commerce player MercadoLibre is expanding into QR code payments as more
payments take place off-platform. It also operates a loan business to sellers and recently announced plans
to launch an investment fund for Argentinians to invest in high-yielding, short-term-securities.
MercadoLibre’s mobile wallet business has been estimated to be valued at $2 billion.
46
Line is looking to build an ecosystem resembling
Alipay/WeChat Pay in Japan
Leading messaging app Line is making a big push into fintech by pushing mobile payments into cash-heavy Japan.
Line has ambitious goals for the number of stores that accept Line Pay and has started to expand into other
financial businesses including wealth management (through a partnership with Nomura to launch an online stock
brokerage) and insurance (through an investment in startup JustInCase and a partnership with Sompo).
47
Grab and Go-Jek have emerged as leading mobile
payments players in Southeast Asia
Go-Jek and Grab have emerged as the leading “super-apps” of Southeast Asia (the equivalent of aiming to provide a platform
that combines Didi, Meituan, Weiying, and Alipay among other services). In 2017, Go-Jek acquired three fintech startups and
60% of the 100M monthly transactions in Go-Jek’s ecosystem are processed through Go-Pay. In September, Go-Jek partnered
with three P2P lending startups to expand into credit. Grab has also announced several partnerships (Chubb, Credit Saison)
through its Grab Financial arm to offer financial services to its driver, agent, and merchant community.
4848
Unbundling the paycheck
# 5 D I S R U P T I N G T H E P A Y D A Y L O A N
49
Household debt balances have accelerated and
total over $13 trillion
Source: FRBNY
$1.25T
$1.4T
$850B
$440B
Home Equity
Revolving
Other
50
First, startups went direct to consumer to head
off debt
AUTO
HOME EQUITY &
RENOVATIONCREDIT CARDSTUDENT
Last Round: $500M Series F Feb’17
Total Funding: $2.2B
Select Investors: G Squared, Silver
Lake Partners, Institutional Venture
Partners, SoftBank Group
Last Round: $32.5M Series D Mar’17
Total Funding: $584.7M
Select Investors: First Round Capital,
Khosla Ventures, Correlation Ventures
IPO: $4.27B May’18
Total Funding: $610M
Select Investors: QED, TPG,
DST, Fifth Third Bank
IPO: $5.46B Dec’14
Total Funding: $263.3M
Select Investors: DST Global, Coatue
Management, capitalG, Canaan
Ventures, Kleiner Perkins
51
Fintech firms are unbundling the paycheck to
alleviate and prevent predatory debt
DIRECT DEPOSITS
DEBT PAYOFF
PAYROLL FLEXIBILITY
PAYDAY ADVANCE
PRE-TAX SPENDING
STUDENT LOAN PAYOFF
EMERGENCY FUND
FINANCIAL LITERACY
EARNED-INCOME ADVANCE
52
Startups are partnering with employers to offer
salary linked benefits
D I S R U P T I N G P A Y R O L L , S T A R T I N G W I T H P A Y D A Y
Last Funding: $125M Series C in Dec’18
Select Investors: DST Global, Andreessen Horowitz, Spark Capital,
Matrix Partners, Coatue Management, Ribbit Capital
Earnin is an app that allows employees to access earned income
ahead of a scheduled payday. Earnin partners with Starbucks,
Pizza Hut, Walmart, and other employers.
Earnin reported they work with employees across 50K companies
and that the app has been downloaded 1M times.
Last Funding: $20M Series B-II in Aug’18
Select Investors: Blenheim Chalcot, Legal & General
UK-based Salary Finance offers installment loans that deducts loan
repayments directly from an employee's salary. In December 2018
they launched a payday advance service allowing employees to
access earned income.
In Q4’18 they announced a partnership with the United Way as a
preferred solution for their network of 10K employers.
53
D I S R U P T I N G P A Y R O L L , S T A R T I N G W I T H P A Y D A Y
Last Funding
$140M Series C // Jul’18
Valuation $2B
Gusto is an HRIS platform that provides HR,
benefits administration, and payroll automation
software.
Since February of 2015 the company has added
over 60K+ small businesses (~1% US SMB
population).
In June 2018, at the CB Insights’ Future of
Fintech conference, Gusto CEO and co-founder
Josh Reeves announced Flexible Pay, the
company’s digital paycheck advancement
service that allows employers to offer earned
income to employees in advance of a
traditional bi-weekly pay cycle.
2018 PARTNERSHIPS
Accounting 401(k)
Workers’ Compensation529 College Savings
5454
New investment platforms and
asset classes
# 6 O P E N I N G T H E M A R K E T F O R I N V E S T O R S & D I V E R S I F I C A T I O N
55
Fintech is democratizing investing
A L T E R N A T I V E A C C E S S T O
I N V E S T I N G
The first wave of investing apps lowered
the barriers for investors to access
existing markets with tech.
A C C E S S T O N E W A S S E T S
Startups are now looking to lower
barriers to enter alternative asset
classes and creating new commercially
available assets.
N E W I N V E S T I N G M O D E L S
T O T A P E X I S T I N G A S S E T S
In tandem, startups are creating next-gen
investment platforms that are focused on
creating new methodologies to access
alternative asset classes.
1 2 3
56
Alternative investment apps will continue to
rise in prominence among next-gen investors
BROKERAGES MARKETPLACES
1
PLATFORMS
57
New investment models will be created to open
up markets and create asset classes
CARS MUSIC MUNICIPALITIES ART
2
MARINE
Last Round:
$7M Series A Sep’18
Investors:
Social Leverage, Anthemis
Group, Upfront Ventures
Last Round:
$12.8M Series A Jan’18
Investors:
Greycroft, FJ Labs, Saturn
Partners, The Raine Group
Last Rounds:
Undisclosed
Last Round:
$3.37M Series B-II Nov’18
Investors:
Grotech Ventures,
Techstarts
Last Round:
$25M Series B May’17
Investors:
8VC, Abstract Ventures,
Sound Ventures, Fintech
Collective, Village Capital
58
Startups borrowing existing biz models to open up
real estate investing to retail investors
F O R R E T A I L I N V E S T O R S
Crowdstreet is a US-based marketplace that connects
accredited investors, family offices, and institutions
with sponsored commercial real estate projects.
Crowdstreet leverages a crowdfunding model to
connect investors to co-invest with developers.
Crowdstreet’s investors have deployed $350M across
250+ properties.
Last Funding
$8M Series B (Jul’18) // US
Lendinvest is a marketplace property lender
that uses a P2P model to connect borrowers
with bridge and rent-to-let financing. Retail and
institutional investors are then able to invest in
LSE listed bonds securitized from the loans.
Lendinvest has lent $2B and helped borrowers
buy, build, and renovate 5,000+ properties.
Last Funding
Series C // London
PEER-TO-PEER CROWDFUNDING
Alphaflow automates real estate investing
by leveraging a robo-advising model to
generate passive income-producing
portfolios.
The company launched in January 2016
and has $17.32M of assets under
management
Last Funding
$1M Convertible Note// US
ROBO-INVESTING
3
5959
Fintech meets real estate
# 7 F I N T E C H D E E P E N S R O O T S I N T H E R E A L E S T A T E E C O S Y S T E M
60
Real estate tech is expanding rapidly
*Note: Real estate tech is a broad vertical and includes companies outside of fintech
2018 saw the tech
landscape in real
estate expand
Deals flowed across the
commercial and residential
real estate markets. Broad
investment themes included
platform-ification, digitization,
and portfolio optimization.
2019 will see these companies
look to take advantage of
consumer demand and supply
of residential properties, and
investor demand for portfolio
exposure and diversification.
61
Mortgage debt dwarfs all others categories
$1.25T
$1.4T
$850B
$9T
Source: FRBNY
62
First, fintech startups digitize the mortgage
lifecycle and created alternative lending platforms
As home values rise, fintech is moving into home
equity
HELOC
Equity sharing /
reverse mortgage
Rent-to-own
Last funding round
Total disclosed
equity funding
Select Investors
$40M Series B
(6/27/18)
F-Prime Capital and
Citi Ventures
$92.84M
waitlist
$50M Series A
(4/30/18)
$50M
Ribbit Capital, DCM Ventures,
and CreditEase Fintech Fund
$12M Series A
(5/23/18)
$12M
American Family Ventures
and General Catalyst
Unattributed
(4/18/18)
$8.65M
Andreessen Horowitz and
Ribbit Capital
$3.5M Seed VC
(9/19/18)
$4.7M
Blumberg Capital and
Montage Ventures
$1.3M Seed VC
(10/23/17)
$1.3M
IA Ventures and
MetaProp NYC
$1M Seed VC
(4/26/18)
$1.12M
Kima Ventures and
Techstars Ventures
64
And abstracting away the mortgage as startups
look to make cash offers for home buyers
F L Y H O M E S R I B B O N
Seattle-based Flyhomes launched as a brokerage and provides a
program to make cash offers on behalf clients. FlyHomes is expanding
into new lines of business to deal with mortgages, title and escrow,
repairs and renovations and more.
New York-based Ribbon, which operates in the Carolinas, works with
homebuyers and their real estate agents to provide home sellers with a
guaranteed sale, and all-cash offer regardless of where buyers are in
the mortgage process.
65
Rent-to-buy: Startups look to enable gradual home
equity ownership
D I V V Y H O M E S V E R B H O U S E
San Francisco-based Divvy allows renters to put down 2% of the price
of a desired property, which Divvy buys and leases back. 25% of the
monthly price goes toward home equity, with 70% going toward rent,
and 5% toward a maintenance fee.
San Francisco-based startup Verbhouse operates a lease-with-an-
option-to-purchase program in the Bay Area that lets program
participants move into homes now with the option to buy later.
66
Fintech is integrating home insurance deeper into
the home buying process
Lenders using Blend Labs represent more than 25% of the total US mortgage market with $60B in mortgage applications flowing
through its software in 2017. Blend launched a home insurance agency in August 2018.
Source: Andreessen Horowitz, “Making Sense of Mortgages,” Blend Labs, CB Insights analysis
67
Startups look to disrupt the $15B title insurance
market
R E A L E S T A T E M E E T S F I N T E C H
In December 2018, States Title acquired
North American Title, the eighth largest
title writer in the United States by market
share. States Title hopes to use data and
technology to predict and risk and
severity of a title defect on particular
properties.
New York-based startup Spruce is a
digital title insurance and escrow
agency. Spruce has worked with lenders
and real estate companies in 36 states
and plans to be in 48 states by the end
of 2018.
Qualia provides cloud workflow
technology to the title, escrow, and
closing process. Clients include Stewart,
First American, and Fidelity National. As
of March 2018, 5% of the national real
estate market was transacted through
Qualia.
6868
Rise of impact fintech
# 8 T H E “ G R E E N ” S T A N D A R D O F I N V E S T I N G
69
“Going green” is not new, but there is renewed
demand driving how ESG scales
S U S T A I N A B I L I T Y I S A
G L O B A L P R I O R I T Y
Tech companies are jumping to head off
concerns over the health of the
environment, sustainability, and
corporate governance (ESG). Upcoming
initiatives will turn up the heat on
companies to prove countries are
progressing positively.
M A R K E T S & E C O N O M Y
Tech companies are tapping into the ESG
and impact investing space which have
seen an uptick in inflows and are gaining
traction among economists and investors.
Market volatility could drive more inflows
into impact investments and position
impact fintech firms to bring
standardization to investment criteria.
D E M O G R A P H I C S H I F T S
Startups are creating next-gen wealth
management platforms for the next
generation of investors who
increasingly want investment portfolios
that align with their values. To grow
distribution and increase engagement,
fintechs with scale could look to tap
into ESG and impact investing.
1 2 3
70
Impact investing and ESG are on the rise
News mentions of “impact investing” and “ESG” (environmental, social, and governance), 2014 – 2019 YTD
71
Global sustainability goals will be top of mind for
policy makers, but measuring progress is subjective
Moderate
movement to goal
Moderate movement
away from goal
People killed in
road accident
Recycling rate of
municipal waste
Sustainable Transport
Adverse environmental impacts
Measured against:
United Nations 2030 Agenda For Sustainable
Development Goals (SDGs)
In 2015, the UN committed to implementing
Sustainable Development Goals (SDGs) that
outline 17 global goals each nation has
pledged to work towards by 2030.
However, each goal and underlying initiatives
are open to interpretation and carry different
weights of importance across regions.
Measuring progress towards goals is
complex, lacks accountability, and is an area
global leaders will demand transparency
from officials tasked with implementation
and governance.
72
Quantifying progress and impact is subjective
because there is no “gold standard” of green data
VS.
73Source: 2016 GSIR
Despite subjective
nature, investing in
impact funds is
growing
2018 saw ESG and impact
portfolios gain academic
recognition for their ability to
generate alpha.
Strategies that intentionally
exclude certain sectors,
companies, or practices are
gaining traction with younger
demographics.
As of 2016, global sustainable investment assets reached
$22.9T
2014 & 2016 ($T)
74
With $30T from the ‘great wealth transfer,’ millennials
will expect choices that have a positive ROI & impact
Millennials are 2X more likely to make sustainable
investments than the average investor.
Source: Survey conducted by Morgan Stanley released in August 2017
86%
Are "very Interested" or "interested"
in sustainable investing
75%
Think their investments can
influence climate change
61%
Have made at least 1 sustainable
investment action in the last year
75
The first layer of impact fintechs are establishing
green data credibility for financial services firms
D A T A > O P I N I O N
DATA INTEGRITYADVISORY CREDIT RISK REAL ESTATEINVESTING
Allows advisors to
conduct negative and
exclusionary screening
Auto rebalances
portfolios to align with
social impact goals
Provides scoring and
reporting for for non-
quantifiable risk events
Platform for scoring and
monitoring environmental
outputs of RE assets
AI database that tracks,
quantifies, and reports
intangible risk for equities
76
The next layer of impact fintech will establish credibility
with next-gen investors, ahead of wealth transfer
BANKING INVESTING LENDING
Digital-first banks that use impact
investments to generate interest on
deposits and savings
Automated wealth management software that allocates
assets across thematic investment funds and ETFs
Investment account that allocates
assets to community development
financial institutions (CDFIs)
7777
Lack of fintech M&A by banks
continues
# 9 D E S P I T E N E W C H A L L E N G E R S , B A N K S L O O K T O B U I L D R A T H E R T H A N B U Y
78
European banks are
challenging back
In H1’18, competition between
high street banks and well-funded
challengers continued to heat up.
While incumbents look to boost
their digital capabilities,
challenger banks are growing
market share and their global
footprint.
As predicted, fresh off mega-
round ($100M+) investments and
unicorn designations, N26, Monzo,
and Revolut all announced plans
build out their US operations.
VS. 2 . 3 M C L I E N T S
3 M C L I E N T S
1 M C L I E N T S
Santander latest traditional player
to open digital bank
May 15, 2018 |
79
RBS hatches plan to create digital challenger bank
to face off the threats from startups like Monzo
and Starling Bank
March 19, 2018 |
2018 saw banks launch a wave of digital products
80
But while banks continue to embrace mobile
banking…
81
..incumbents still miss on mobile UX/UI, a key to
acquiring and engaging next-gen customers
US IOS App Store ratings (out of 5)
VS.
2018 Peak: #1 overall
82
• Regulatory barriers, legacy tech
infrastructure, cultural barriers
and reluctance to carry inflated
goodwill (intangible assets)
values on balance sheets pose
challenges for incumbents
looking for fintech startups
• 20 fintechs have been acquired
by banks
• Goldman has been the most
active with their biggest
announced acquisition being of
PFM app Clarity Money in April
2018
Banks will remain trigger shy on acquisitions
2013 – 2019 (01/12/2019)
8383
No-go for fintech IPOs
# 1 0 F I N T E C H I P O S F A I L T O M A T E R I A L I Z E I N 2 0 1 9
84
CHINA
UNITED KINGDOM
UNITED STATES
INDIA
SWEDEN NETHERLANDS
NORTH AMERICA
EUROPE
ASIA
2018 started the year with 25 unicorns valued at $75.9B
Global VC-backed fintech companies with a private market valuation of $1B+ (01/01/2019)
$1.79B Valuation $1.3B
$1B Valuation
$1.46B
$1B
$18.5B
$7B
$1.1B Valuation $2.3B$2.5B$1B
$1.56B
$1.4B
$1B
$1.2B
$9.2B
$1B
$1.9B
$2B (as of Q2’15)
$2.7B
$4.5B
$2.4B (as of Q4’14)
$3.6B$3.5B
$1B
85
CHINA
INDIA
SWEDEN
NORTH AMERICA
EUROPE
ASIA
Despite hype, only three fintech unicorns went public
Global VC-backed fintech companies with a private market valuation of $1B+ (01/01/2019)
$1.79B Valuation $1.3B
$1B Valuation
$1.46B
$1B
$18.5B
$7B
$1.1B Valuation $2.5B
$1.56B
$1.4B
$1B
$1.2B
$9.2B
$1B
$1.9B
$2B (as of Q2’15)
$2.7B
$4.5B
$2.4B (as of Q4’14)
$3.5B
$1B
GreenSky stock rises after several analysts
initiate coverage with bullish ratings
June 18, 2018 |
UNITED KINGDOM NETHERLANDS
$2.3B$1B
$3.6B
UNITED STATES
86
Adyen makes record public debut in Europe
Netherlands-based payments processor Adyen saw shares jumped 98% on 1st day of trading
Mkt Cap Euro 13.44B
87
Alternative lenders ‘bear’ market volatility
Mkt Cap $2B (1/18/19)
Mkt Cap $1.2B (1/21/19)
88
Record fintech mega-rounds will likely delay IPOs
2 0 1 8 S E E S R E C O R D G L O B A L F I N T E C H M E G A - R O U N D S ( $ 1 0 0 M + )
$1B+ (2)
$500M+ (1)
$300M+ (8)
China
US
India
UK
Germany
Brazil
Hong Kong
Australia
Legend:
$200M+ (10)
$100M+ (31)
89
Stripe, the global payments provider,
has been aggressively expanding its
tech stack. The company plans to use
the latest funding to expand into
Southeast Asia and India.
According to Bloomberg, Stripe sales
are roughly $1.5B annually. Stripe
supports businesses in 120 countries,
payments in 130 currencies, and
provides services ranging from fraud
prevention to accounting. Stripe
reports that 65% of UK internet users
and 80% of US users have bought
something from a Stripe-powered
business.
D E M O C R A T I Z I N G G L O B A L P A Y M E N T S A N D E N A B L I N G T H E D I G I T A L E C O N O M Y > I P O
Last Funding
$245M Series E // Sep’18
Valuation $20.3B
ENABLING DEVELOPERS
Stripe’s growing integrated technology stack
for global money movement
GLOBAL PAYMENTS &
TREASSURY NETWORK
SHIIPPING PRODUCT
2019 GOALS:
CFO transitions to chief product
officer, leaving the role vacant
December 5, 2018 |
90
2018 global fintech
year-in-review
A P P E N D I X :
9191
$11.89 BILLION
659 DEALS
U S F I N T E C H V C - B A C K E D E Q U I T Y F U N D I N G I N 2 0 1 8 :
A C R O S S
92
US fintech funding hits 5-year high as $100M
mega-rounds tops record
North America VC-backed fintech financing trends, 2014 - 2018, ($M)
$5.71 $8.81 $5.92 $8.18 $11.89
518
588 570 594
659
2014 2015 2016 2017 2018
Amount ($B) Deals
93
US fintech deals cross 5-quarter low, despite annual high
US VC-backed fintech financing trends, Q4’17 – Q4’18, ($B)
US deals and
funding top a 5-year
high
Funding surged in 2018 on the
back of 25 mega-rounds worth
$5B.
Q4’18 saw 10 mega-rounds, 3
of which minted new unicorns,
Brex, Devoted Health, and
Plaid.
Other mega-rounds in the year
boosted the valuations of
established unicorns like
Stripe, Robinhood, and
Coinbase. $2.4 $2.4 $3.3 $3.0 $3.3
146
191
169
157
142
$-
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
Amount ($B) Deals
9494
$22.65 BILLION
516 DEALS
A S I A F I N T E C H V C - B A C K E D E Q U I T Y F U N D I N G I N 2 0 1 8 :
A C R O S S
95
Fintech funding in Asia spikes to $22.7B on the
back of $14B Ant Financial investment
Asia VC-backed fintech financing trends, 2014 - 2018, ($B)
$1.11 $5.03 $11.34 $6.20 $22.65
156
256
318
373
516
2014 2015 2016 2017 2018
Amount ($B) Deals
9696
$3.53 Billion
367 DEALS
E U R O P E F I N T E C H V C - B A C K E D E Q U I T Y F U N D I N G I N 2 0 1 8 :
A C R O S S
97
$1.20 $2.01 $1.38 $2.84 $3.53
144
234
262
371 367
2014 2015 2016 2017 2018
Amount ($B) Deals
Fintech deals in Europe level off, as funding hits
$3.5B in 2018
Europe VC-backed fintech financing trends, 2014 - 2018, ($B)
98
$375.01 $1,047.85 $558.27 $1,457.57 $1,514.68
61
110
88
139
114
2014 2015 2016 2017 2018
Amount ($M) Deals
UK-based fintech rebounded despite pull-back in Europe
UK VC-backed fintech financing trends, 2014 – 2018, ($M)
UK fintech deals fall
18% in 2018
Brexit concerns may have
contributed to a year-over-
year decline in UK fintech
financing rounds in 2018.
Funding to UK-based fintech
companies grew slightly on
the back on significant
investments to digital-first
“challenger banks” Monzo
and Revolut. Both became
unicorns in 2018.
#AhaCBI
Top deals &
investors
100
Company
Deal Date //
Amount
Total Disclosed
Funding (M) Select Investors Description
May’18 // $14,000M $19,145M
($150B Valuation)
Silver Lake Partners, General Atlantic, T.
Rowe Price, Temasek Holdings, Sequoia
Capital China, Warburg Pincus, & others
China-based internet giant that provides a suite of
financial services spanning payments, insurance,
credit, wealth management, and others, through
various subsidiaries including Alipay & Yu’e Bao
Dec’18 // $1,350M $3,031M
($3.8B Valuation)
Goldman Sachs, JP Morgan, UBS An internet lending and wealth management
platform for SMB and retail consumers
Jan’18 // $650M $650M
($1B Valuation)
IDG Capital and SBI Group A spin-out from Ping An providing a platform for
financial account management for SMBs.
Jun’18 // $392M $569M
($1.2-$1.6B Valuation)
Venrock, Goldman Sachs, GSV B2B data analytics suite of modular desktop and
API applications that leverage social media to
detect events, consumer signals, and alerts
Dec’18 // $385M $1,451M CreditEase, Munich Re/HSB Ventures,
SoftBank Group
Auto lending and finance management platform
Top 11 global fintech deals in 2018
The top 3 deals to VC-backed fintech companies were all mega-rounds ($100M+) in China
101
Company
Deal Date //
Amount
Total Disclosed
Funding (M) Select Investors Description
Aug’18 // $375M $1.27B
($3.2B Valuation)
Alphabet Tech-enabled health insurance carrier
May’18 // $363M $539M
($5.6B Valuation)
capitalG, DST Global, ICONIQ Capital,
Kleiner Perkins Caufield & Byers, Sequoia
Capital
B2C digital brokerage and financial services
platform that lets users invest in U.S. stocks,
ETFs, options, and cryptocurrencies
Jun’18 // $359M $536M Geo-Jade Petroleum Corporation,
Shunwei Capital Partners
Web-based investment portal that provides
various debt-backed investments products for
individual and SMB investors
Aug’18 // $300M $3.07B
($10B Valuation)
Berkshire Hathaway Mobile payments and commerce platform
Oct’18 // $300M $368.95M
($1.8B Valuation)
Andreessen Horowitz, F-Prime Capital,
Premji Invest, Uprising, Venrock
Digital health care company serving seniors,
aiming to launch Medicare Advantage plans
Oct’18 // $300M $538.67M
($8B Valuation)
Andreessen Horowitz, Polychain Capital,
Tiger Global Management, Wellington
Management
Crypto currency exchange, wallet, and platform for
retail and institutional investing and transactions
in digital currencies
Top 11 global fintech deals in 2018
6 of the top 11 deals to VC-backed fintech companies were to US-based startups
102
The most active fintech VCs in 2018
By unique fintech company investments (new or follow-on)
Rank Investor Select Fintech Investments
1
2
3
4
5
103
The most active fintech VCs in 2018 (continued)
By unique fintech company investments (new or follow-on)
Rank Investor Select Fintech Investments
6
7
8
9
104
Methodology
CB Insights encourages you to review the methodology and definitions employed to better understand the numbers presented in this
report. If you have any questions about the definitions or methodological principles used, we encourage you to reach out to CB Insights
directly. Additionally, if you feel your firm has been under-represented, please send an email to info@cbinsights.com and we can work
together to ensure your firm’s investment data is up to date.
What is included: What is excluded:
― Equity financings into emerging fintech companies. Fundings must be put into VC-backed
companies, which are defined as companies who have received funding at any point from
venture capital firms, corporate venture groups, or super angel investors.
― Fundings of only private companies. Funding rounds raised by public companies of any
kind on any exchange (including Pink Sheets) are excluded from our numbers, even if they
received investment by a venture firm(s).
― Only includes the investment made in the quarter for tranched investments. If a company
does a second closing of its Series B round for $5M and previously had closed $2M in a
prior quarter, only the $5M is reflected in our results.
― Round numbers reflect what has closed — not what is intended. If a company indicates
the closing of $5M out of a desired raise of $15M, our numbers reflect only the amount
which has closed.
― Only verifiable fundings are included. Fundings are verified via various federal and state
regulatory filings, direct confirmation with firm or investor, or press release.
― Previous quarterly VC reports issued by CBI have exclusively included VC-backed rounds.
In this report, any rounds raised by VC-backed companies are included, with the
exceptions listed.
— No contingent funding. If a company receives a commitment for $20M subject to hitting
certain milestones but first gets $8M, only the $8M is included in our data.
— No business development / R&D arrangements, whether transferable into equity now, later, or
never. If a company signs a $300M R&D partnership with a larger corporation, this is not equity
financing, nor is it from a venture capital firm. As a result, it is not included.
— No buyouts, consolidations, and/or recapitalizations. All three of these transaction types are
commonly employed by private equity firms and are tracked by CB Insights. However, they are
excluded for the purposes of this report.
— No private placements. These investments, also known as PIPEs (Private Investment in Public
Equities), are excluded even if made by a venture capital firm(s).
— No debt / loans of any kind (except convertible notes). Venture debt or any kind of debt / loan
issued to emerging startup companies, even if included as an additional part of an equity
financing, is not included. If a company receives $3M with $2M from venture investors and
$1M in debt, only the $2M is included.
— No government funding. Grants, loans, or equity financings by the federal government, state
agencies, or public-private partnerships to emerging startup companies are not included.
105
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2019 Fintech Trends To Watch by CBInsights

  • 1. 0
  • 2. 1 WHAT I S CB I N S I G HTS ? CB Insights is a tech market intelligence platform that analyzes millions of data points on venture capital, startups, patents, partnerships and news mentions to help you see tomorrow’s opportunities, today. CLICK HERE TO LEARN MORE
  • 3. 2 T R U S T E D B Y T H E W O R L D ’ S L E A D I N G C O M P A N I E S “We use CB Insights to find emerging trends and interesting companies that might signal a shift in technology or require us to reallocate resources.” Beti Cung, Corporate Strategy, Microsoft
  • 4. 3 I N D U S T R Y - S C A L E S U M M I T S C L I E N T - O N L Y E V E N T SP E E R - T O - P E E R N E T W O R K The CBI Community — Membership Has Benefits events.cbinsights.com DEMO DAY
  • 5. 4#FutureFintech s @ s June 11 - 13, 2019 New York, NY events.cbinsights.com/future-of-fintech
  • 6. Fintech mega-rounds continued in Q4’18, while IPO activity is likely to remain lackluster in 2019: 2018 saw a whopping 52 $100M+ financing deals to VC-backed fintech companies – including 14 in Q4’18 worth $3.8B. Asia made a run at the US as the top market for fintech with a surge in early-stage and mega-round investments: Asia saw the biggest boost in deals, growing 38% YOY and a record level of funding raising $22.65B across 516 deals. Political and trade war tensions may have caused some of the pull back in H2’18, but 2019 could see Asia overtake the US. The US remained the top market for deals with 659 investments worth $11.89B funding, both a new annual high: Europe saw a pull back in deals to 367 deals but funding topped $3.53B, an annual record. South America reached a turning point in the eyes of investors in 2018, despite political turmoil across the region: South America saw funding top $540M across 55 deals, both a new annual record. In H2’18, investors started to pull back in the region as social, political, and monetary conflicts struck the region. Despite strain, Brazil-based NuBank, became South America’s first unicorn and closed out 2018 with a $90M investment from Tencent. Note: Report focuses on all equity rounds to VC-backed fintech companies. This report does not cover companies funded solely by angels, private equity firms, or any debt, secondary, or line of 5 credit transactions. All data is sourced from CB Insights. Summary of findings 2018 VC-backed fintech deals and funding set an annual record: In 2018, VC-backed fintech companies raised $39.57B across 1,707 deals globally. Deals were up 15% year-over-year while funding surged 120% on the back of 52 mega-rounds ($100M+) worth $24.88B combined. Fintech is happening on global scale with deals outside of core markets (US, UK, and China) accounting for 39% of deals: Fintech deal hubs are starting to emerge globally. The count of unique fintech startups raising funding topped an annual high of 1,463 companies, and the unique number of investors reached 2,745 boosted by an influx of corporate investors. Early-stage deals, as a percentage, fell to a 5-year low as investors concentrated bets in perceived winners: Global seed and Series A fintech deals grew 5% on an annual basis in 2018, but fell as a percentage of total deals to 57%. US early-stage deals were flat YOY as investors concentrated their bets in established fintech unicorns. There are 39 VC-backed fintech unicorns worth a combined $147.37B: Q4'18 saw five new unicorns births (Plaid, Brex, Monzo, DevotedHealth, and Toss) and two in the first month of Q1’19 (N26 and Confluent). The cohort’s total valuation in 2018 was boosted by a record year for mega- rounds to existing unicorns, including Gusto and Robinhood, among others.
  • 7. 6 Contents 8 2018 Financing Trends Annual Deals & Dollars Regional Trends Fintech Unicorns 9 0 Appendix: 2018 Top VC-Backed Fintech Deals 2018 Most Active Fintech Investors 2 1 2019 Trends To Watch How we did in 2018 What to watch for in 2019 Where investors are placing bets in fintech Which markets will see fintech emergence How incumbents will act
  • 8. 7 LENDING BLOCKCHAIN/ CRYPTO REGTECH PERSONAL FINANCE PAYMENTS/ BILLING MONEY TRANSFER/ REMITTANCES WEALTH MANAGEMENT CAPITAL MARKETS MORTGAGE/ REAL ESTATE INSURANCE 2019 FINTECH TRENDS REPORT Marketplace lending & alternative underwriting platforms Payments processing, card developers, & subscription billing software tools Tools to manage bills and track personal and/or credit accounts Audit, risk, and regulatory compliance software Companies leveraging blockchain technologies for financial services Companies selling insurance digitally or providing data analytics and software for (re)insurers Sales & trading, analysis, and infrastructure tools for financial institutions Investment and wealth management platforms and analytics tools International money transfer and tracking software Mortgage lending, digitization, and financing platforms WHAT THIS REPORT COVERS
  • 9. 8 First, a look at what happened in 2018… 1. Global fintech financing hit a new record 2. Early-stage fintech deal activity slowed down 3. 16 new fintech unicorns were birthed
  • 10. 9 $8.34 $16.30 $19.29 $18.00 $39.57 885 1,153 1,254 1,480 1,707 2014 2015 2016 2017 2018 Global fintech investment tops $39B in 2018 Annual global fintech deals and financing, 2014 – 2018 ($B) F I N T E C H D E A L S A N D F U N D I N G S O A R T O N E W R E C O R D S
  • 11. 10 $1,728 $1,979 $1,393 $3,236 $2,694 $4,977 $6,351 $2,280 $5,405 $8,455 $2,905 $2,525 $3,204 $5,737 $4,570 $4,501 $5,977 $20,526 $6,039 $7,033 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Ant Financial’s $14B investment accounted for 35% of total funding in 2018 $4,500 $14,000
  • 12. 11 192 210 237 246 260 292 331 270 337 315 304 298 365 385 366 364 426 441 440 400 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 VC-backed fintech deals declined in Q4’18 but remain above 2017 levels Q 4 ’ 1 8 S A W A T H R E E - Q U A R T E R L O W F O R G L O B A L V C - B A C K E D F I N T E C H D E A L S
  • 13. 12 $5,923 $9,125 $6,267 $8,673 $12,415 $1,114 $5,028 $6,842 $6,203 $8,648 $1,198 $2,009 $1,377 $2,843 $3,525 $22 $103 $69 $343 $202 $540 2014 2015 2016 2017 2018 North America is no longer powering global fintech funding growth Global VC-backed fintech funding by continent, 2014 – 2018, ($M) (*Ant Financial excluded) *Ant Financials' $14B round in Q2’18 was excluded from the chart represented on this slide for illustrative purposes Africa 376% YOY South America Europe 24% YOY Asia 265%* YOY North America 43% YOY 167% YOY Australia 396% YOY
  • 14. 13 Deals grew in every market except Europe in 2018 Global VC-backed fintech deals by continent, 2014 – 2018 Note: Charts not to scale 553 629 622 643 717 156 256 318 373 516 144 234 262 371 367 2014 2015 2016 2017 2018 North America Asia Europe 3 6 7 17 27 16 10 21 23 25 13 18 24 53 55 2014 2015 2016 2017 2018 Africa Australia South America
  • 15. 14 67% 65% 64% 62% 57% 17% 19% 18% 18% 21% 8% 7% 6% 7% 6% 8% 9% 12% 13% 16% 2014 2015 2016 2017 2018 Early-stage fintech deal share falls for the 5th year Annual deal share by stage to global VC-backed fintech companies, 2014 – 2018 Mid-Stage Early-Stage Late-Stage Other
  • 16. 1515 39 FINTECH UNICORNS $147.37 BILLION G L O B A L L Y T H E R E A R E V A L U E D , I N A G G R E G A T E , A T
  • 17. 16 SWEDEN EUROPE $5.3B $1.6B Valuation $2.0 - $2.5B $8B $1.24B $1B $1.2B SOUTH AMERICA $4B Valuation BRAZIL NORTH AMERICA $20.3B Valuation $3.2B $3B $4B$1.8B $1.9B $10B CHINA INDIA ASIA $1.4B $38B Valuation $1B $1.5B $1B $2B $2.1B (as of Q2’15) $1B$1.2 - $1.6B $1.4B $1B $3B 39 fintech unicorns valued at $147.37B Global VC-backed fintech companies with a private market valuation of $1B+ (1/25/19) UNITED KINGDOM $1.7B $1.6B $1.1B $1.2B $1.1B$1.8B $2.7B $1.27B SOUTH KOREA UNITED STATES GERMANY $2.7B (as of Q1’19) $1B $4.49B (as of Q1’17) $2.5B (as of Q1’19)
  • 18. 17 SWEDEN EUROPE $5.3B $1.6B Valuation $2.0 - $2.5B $8B $1.24B $1B $1.2B SOUTH AMERICA NORTH AMERICA $20.3B Valuation $3.2B $4B$1.8B $1.9B $10B ASIA $1.4B $38B Valuation $1.5B $1B $2B $2.1B (as of Q2’15) 16 fintech unicorn births in 2018 Global VC-backed fintech companies with a private market valuation of $1B+ (1/25/19) GERMANY $2.7B (as of Q1’19) $1B $4.49B (as of Q1’17) $2.5B (as of Q1’19) UNITED STATES UNITED KINGDOM $1.7B $1.27B CHINA $1.2B SOUTH KOREA $3B $1B$1.2 - $1.6B $1.4B $1B $3B $1.1B$1.8B $2.7B INDIA $1B $1.6B $1.1B $4B Valuation BRAZIL
  • 19. 18 5 18 8 21 25 3 11 10 12 18 7 1 1 2014 2015 2016 2017 2018 North America Asia Europe South America Australia 2018: 52 fintech mega-rounds total $24.88B Global number of fintech mega-rounds ($100M+), 2014 – 2018 G R O W T H I N V E S T I N G I N F I N T E C H H I T A P E A K I N 2 0 1 8
  • 20. 19 17% 21% 26% 28% 33% 83% 79% 74% 73% 67% 2014 2015 2016 2017 2018 Corp / CVC Participation Other Investors A third of global fintech deals include a CVC N U M B E R O F F I N T E C H I N V E S T O R S D O U B L E S I N C E 2 0 1 4 Number of investors in a fintech startup reached a new high in 2018 2014 – 2018 Corporate and CVC participation in fintech saw a new annual high 2014 – 2018 1,349 1,779 1,973 2,327 2,745 2014 2015 2016 2017 2018
  • 21. 20 Traditional hubs no longer power fintech growth F I N T E C H D E A L S S H I F T A W A Y F R O M C H I N A A N D T H E U S Count of fintech startups raising funding hit an annual record in 2018 2014 – 2018 745 990 1,077 1,247 1,463 2014 2015 2016 2017 2018 Deals are shifting away from core fintech hubs 2014 – 2018 73% 68% 61% 59% 61% 27% 32% 39% 41% 39% 2014 2015 2016 2017 2018 Deals in China, UK, US Deals Outside Core Markets
  • 23. 22 B U T F I R S T … H O W D I D W E D O O N O U R 2 0 1 8 F I N T E C H T R E N D S T O W A T C H ? 2018 TREND TO WATCH KEY DEVELOPMENTS HOW WE DID 1. Fintech unbundling leads to rebundling • Rebundling had a false start in 2018, as startups underestimated the time to market and regulations • In 2019, the battle for millennial deposits will become more aggressive as fintech account products hit the market 2. European fintechs will expand their global footprint • Digital-first banks flourished in Europe under tech favorable regulations and funding environment • Monzo, Revolut, and N26 became unicorns and, though none went live, all established US operation plans for 2019 3. Banks forgo partnering in favor of fighting fintech with fintech • Goldman Sachs was the most active in investing and building out fintech with retail bank Marcus • Many incumbents made valiant attempts to build and launch fintech competitors, but most missed on adoption 4. Wealth management will become the hottest fintech sector in China • Asia cracked down on alternative lenders to tighten credit as defaults surged • Lufax and Ant Financial raised over $15B in funding as China’s broader fintech landscape consolidates 5. Latin America and Southeast Asia will see strong fintech growth • Both Latin America and South East Asia fintech deals and funding hit annual highs in 2018 • Under pressure, Latin America may see funding cool off while Southeast Asia is likely to continue to grow in 2019 6. More companies will look to sell pickaxes amid cryptoasset speculation • Cryptocurrencies were strained as regulators globally ironed out regulation and guidance • ICO frauds created speculation and detoured retail investors however, equity investments rebounded 7. Capital markets fintech infrastructure becomes a focus area for investment • Plaid became the first infrastructure unicorn and started 2019 by acquiring competitor Quovo • 2019 will see more consolidation in infrastructure focused companies under fee-compression in the industry 8. Banks deepen their partnerships with regtech • Marquee regulations were implemented creating demand for regtech but adoption trailed • Regulators promoted tech adoption and, in 2019, will look to guide banks through integrating with core infrastructure 9. Insurance tech investment moves to the back-end • Mega-round investments were spread out among full-stack insurers and intermediaries • Consolidation in insurtech make take form in 2019 as VC early-stage startups fail to show enough market traction 10. Amazon is primed to get more aggressive in fintech — outside of the US • Rumors swirled that Amazon was partnering with JPM or Capital One to launch bank accounts • Amazon picked up fintech investments in India, a key growth market for the e-commerce giant
  • 24. 23 1. The battle for deposits 2. Fintech firms up focus on regulatory compliance 3. Southeast Asia sees hotbed of fintech activity 4. The next Ant Financial & WeChat Pay 5. Unbundling the paycheck 6. New investment platforms and asset classes 7. Fintech meets real estate 8. Rise of impact fintech 9. Lack of fintech M&A by banks continues 10. No-go for fintech IPOs 2 0 1 9 T R E N D S T O W A T C H
  • 25. 2424 The battle for deposits # 1 F I N T E C H R E B U N D L I N G G E T S M O R E A G G R E S S I V E
  • 26. 25 Fintech firms look for their second act Fintech firms are becoming more aggressive in expanding their lines of business beyond their initial use case B U Y I N G B U I L D I N G P A R T N E R I N G + + Affirm debating move into savings accounts next January 9, 2019 NuBank receives regulatory approval to launch NuCanta bank accounts April 2018 Revolut hires CTO to head up wealth management and trading division January 9, 2019 +
  • 27. 26 S A M E G O A L , D I F F E R E N T E N T R Y P O I N T Fintech moves from mono-line to multi-line FIRST BEACHHEAD DIGITAL WALLET ROBO-ADVISOR MICRO-INVESTING BROKERAGE PERSONAL FINANCE CRYPTO NEXT PILLAR BANK ACCOUNTS REAL ESTATE COLLEGE SAVINGS BROKERAGE LENDING INSTITUTIONAL INVESTING CRYPTOWEALTH MANAGEMENT BANK ACCOUNTS CRYPTO WEALTH MANAGEMENT LENDING BANK ACCOUNTS INDEX INVESTINGMARGIN INVESTING Fintech startups are rebundling products and services ahead of their maturing customer base WEALTH MANAGEMENT BANK ACCOUNTS
  • 28. 27 Banking-as-a-service platforms facilitate US fintech companies to expand to bank accounts NOTABLE PARTNERS NOTABLE PARTNERS Green Dot uses its own bank, Green Dot Bank, and what it calls its banking-as-a-service platform to offer mobile banking capabilities to third party providers. In April 2018, StoneCastle Partners and Q2 Holdings announced the launch of Cambr, merging Q2’s digital platform CorePro and StoneCastle’s digital deposit network of 800+ community banks and relationships with banks of record.
  • 29. 28 Abroad, fintech firms are looking to build their own chartered banks Fintech startups that want to replace the old guard of banking are leveraging regulatory tailwinds and applying for charters and licenses with respective regulators. Regulators globally have been lowering the barriers for tech startups to enter the market as a way to break up banking monopolies and stimulate competition. The FCA was among the earliest to pilot limited licenses like the “e-money license” that enabled tech entrants like Revolut to launch a remittances business through initially partnering with a chartered bank, that decreased the company’s time to market. Revolut obtained a charter in 2018 and has been applying the same playbook to expand globally.
  • 30. 29 The battle for distribution will start with deposits By attaining a customer’s paycheck, fintech challengers are able to make money on interest, and more importantly, set themselves up for future product innovation. If a customer’s money is already being deposited in an app, introducing new products — such as savings and investment accounts — can be seamless. Debit cards are often fintechs’ first cross- over product because the service adds another product and revenue stream. Fintechs are also able to receive significantly higher interchange fees than traditional banks as a result of the Durbin Amendment, which limits the fees stores pay banks when customers make purchases with debit cards.
  • 31. 3030 # 2 R E G U L A T O R S B E C O M E M O R E E M B O L D E N E D Fintech firms up focus on regulatory compliance
  • 32. 31 Emboldened regulators globally are… 2 0 1 9 R E G U L A T O R Y D R I V E R S C R A C K I N G D O W N O N B A D A C T O R S As startups look to launch new products, it will be essential for fintech challengers (and incumbents) to continue to build inroads with regulators to avoid roadblocks. C O L L A B O R A T I N G A N D S P R E A D I N G I N N O V A T I O N Regulators globally have been actively promoting innovation and embracing tech to break up local banking monopolies. Regulatory support has lowered the barriers for startups to enter markets. 1 2
  • 33. 32 Regulators are upping oversight on bad actors, issuing massive “unicorn” level fines Fines include non-compliance with AML, KYC, and sanctions, and exclude crisis-related settlements, ($M) Final figure pending Reported final figure $15 $54 $135 $145 $205 $369 $534 $575 $613 $900 $1,000 $1,340 $1,600 $7,500 $8,000 UBS BNY JP Morgan UBS Deutsche Bank Rabobank CBA Wells Fargo US Bank ING Wells Fargo Société Générale Standard Chartered Goldman Sachs Dankse Bank
  • 34. 33 Regulators are increasing their scrutiny of high- profile consumer fintech challengers VS.12:21PM 9:45AM Within 24 hours 973,233 “Checking & Savings” Now “Cash Management” 1 DayDecember 13, 2018 1 Week 1 Month
  • 35. 3434 “I disagree with the statement that these funds are protected by SIPC. Had they called us, I would have told them what I just told you in that I have serious concerns about this. This has gigantic ramifications for the banking industry.” -Stephen Harbeck President & CEO, SIPC A L S O W I T H I N 2 4 H O U R S
  • 36. 35 Brazil cuts interest rates to new record low of 6.5% March 21, 2018 | But regulators have also lowered barriers R E G U L A T O R S O P E N T H E D O O R F O R F I N T E C H
  • 37. 36 As tech startups take advantage of open banking access, they will need in-house regulatory teams LATIN AMERICA CANADA AFRICA • OCC explores a “fintech charter” • OCC issues conditional banking charter UNITED STATES • In Jan’19 the FCA reported 80 TPPs registered • As of Sept’18 there were 17.5M monthly open API calls • Both the EU’s revised payment services directive (PSD2) and UK’s Open Banking went live • Brazil’s central bank issues new banking rules • Chile regulators follow Brazil’s lead • The Hong Kong Monetary Authority drafted open API frameworks • HKMA starts issuing virtual bank guidance and licenses • The Department of Finance Canada launches Advisory Committee on Open Banking and open call for input • Australia Securities and Investment commission (ASIC) openly endorsed open banking guidelines • Open Banking put on hold in Jan’18 by the federal government MEXICO • Mexico passes “Fintech Law” and requires banks to establish open APIs • Nigeria set up an Open Technology Foundation, a not- for-profit industry group developing open API standards • South Africa Reserve Bank (SARB) started researching the establishment of a a regulatory sandbox EUROPE ASIA AUSTRALIA & NEW ZEALAND
  • 38. 3737 Southeast Asia sees hotbed of fintech activity # 3 S T A R T U P I N V E S T M E N T M O V E S F R O M C O M M E R C E T O F I N T E C H
  • 39. 38 Fintech in Southeast Asia is heating up with record year for deals and funding, up 143% YOY $9.66 $173.39 $114.31 $199.42 $484.71 19 38 57 54 68 2014 2015 2016 2017 2018
  • 40. 39 Southeast Asia fintech startups are attracting bigger financings and foreign investors Last Round: $40M Series D in Q1’19 Sector: E-commerce installment lending Investors: Ant Financial Last Round: $24M Series B in Q3’18 Sector: OS services for SMBs Investors: Sequoia Capital, East Ventures, Convergence Ventures Last Round: $28M Series C in Q3’18 Sector: Financial services comparison Investors: Experian Ventures, Telstra Ventures, Korea Investment Partners Last Round: $100M Series C in Q1’19 Sectors: Digital wallet and payments Investors: Warburg Pincus Last Round: $2.4M Series A in Q1’18 Sector: Financial services comparison Investors: B. Grimm, European Venture Partners Last Round: $40M Corporate Minority in Q4’18 Sectors: Digital wallet and remittances Investors: KKR, Tencent, IFC
  • 41. 40 Ant Financial is becoming more aggressive in expanding its reach in Southeast Asia THAILAND PHILIPPINES MALAYSIA INDONESIA PARTNERING LOCALLY TO EXPAND MOBILE PAYMENTS LOOKING FOR STRATEGIC INVESTMENTS IN OTHER FINANCIAL CATEGORIES CAMBODIA VIETNAM
  • 42. 41 Ride-hailing platforms may end up as biggest fintech winners in Southeast Asia BUILD BUY PARTNER
  • 43. 4242 The next Ant Financial & WeChat Pay # 4 I N T E R N E T P L A T F O R M S G L O B A L L Y E X P A N D I N T O P A Y M E N T S
  • 44. 43 QR codes are the entry point to digital payments
  • 45. 44 Alipay and WeChat Pay are leading China’s transition to a cashless economy
  • 46. 45 Fintech is powering the growth of MercadoLibre in Latin America Leading Latin American e-Commerce player MercadoLibre is expanding into QR code payments as more payments take place off-platform. It also operates a loan business to sellers and recently announced plans to launch an investment fund for Argentinians to invest in high-yielding, short-term-securities. MercadoLibre’s mobile wallet business has been estimated to be valued at $2 billion.
  • 47. 46 Line is looking to build an ecosystem resembling Alipay/WeChat Pay in Japan Leading messaging app Line is making a big push into fintech by pushing mobile payments into cash-heavy Japan. Line has ambitious goals for the number of stores that accept Line Pay and has started to expand into other financial businesses including wealth management (through a partnership with Nomura to launch an online stock brokerage) and insurance (through an investment in startup JustInCase and a partnership with Sompo).
  • 48. 47 Grab and Go-Jek have emerged as leading mobile payments players in Southeast Asia Go-Jek and Grab have emerged as the leading “super-apps” of Southeast Asia (the equivalent of aiming to provide a platform that combines Didi, Meituan, Weiying, and Alipay among other services). In 2017, Go-Jek acquired three fintech startups and 60% of the 100M monthly transactions in Go-Jek’s ecosystem are processed through Go-Pay. In September, Go-Jek partnered with three P2P lending startups to expand into credit. Grab has also announced several partnerships (Chubb, Credit Saison) through its Grab Financial arm to offer financial services to its driver, agent, and merchant community.
  • 49. 4848 Unbundling the paycheck # 5 D I S R U P T I N G T H E P A Y D A Y L O A N
  • 50. 49 Household debt balances have accelerated and total over $13 trillion Source: FRBNY $1.25T $1.4T $850B $440B Home Equity Revolving Other
  • 51. 50 First, startups went direct to consumer to head off debt AUTO HOME EQUITY & RENOVATIONCREDIT CARDSTUDENT Last Round: $500M Series F Feb’17 Total Funding: $2.2B Select Investors: G Squared, Silver Lake Partners, Institutional Venture Partners, SoftBank Group Last Round: $32.5M Series D Mar’17 Total Funding: $584.7M Select Investors: First Round Capital, Khosla Ventures, Correlation Ventures IPO: $4.27B May’18 Total Funding: $610M Select Investors: QED, TPG, DST, Fifth Third Bank IPO: $5.46B Dec’14 Total Funding: $263.3M Select Investors: DST Global, Coatue Management, capitalG, Canaan Ventures, Kleiner Perkins
  • 52. 51 Fintech firms are unbundling the paycheck to alleviate and prevent predatory debt DIRECT DEPOSITS DEBT PAYOFF PAYROLL FLEXIBILITY PAYDAY ADVANCE PRE-TAX SPENDING STUDENT LOAN PAYOFF EMERGENCY FUND FINANCIAL LITERACY EARNED-INCOME ADVANCE
  • 53. 52 Startups are partnering with employers to offer salary linked benefits D I S R U P T I N G P A Y R O L L , S T A R T I N G W I T H P A Y D A Y Last Funding: $125M Series C in Dec’18 Select Investors: DST Global, Andreessen Horowitz, Spark Capital, Matrix Partners, Coatue Management, Ribbit Capital Earnin is an app that allows employees to access earned income ahead of a scheduled payday. Earnin partners with Starbucks, Pizza Hut, Walmart, and other employers. Earnin reported they work with employees across 50K companies and that the app has been downloaded 1M times. Last Funding: $20M Series B-II in Aug’18 Select Investors: Blenheim Chalcot, Legal & General UK-based Salary Finance offers installment loans that deducts loan repayments directly from an employee's salary. In December 2018 they launched a payday advance service allowing employees to access earned income. In Q4’18 they announced a partnership with the United Way as a preferred solution for their network of 10K employers.
  • 54. 53 D I S R U P T I N G P A Y R O L L , S T A R T I N G W I T H P A Y D A Y Last Funding $140M Series C // Jul’18 Valuation $2B Gusto is an HRIS platform that provides HR, benefits administration, and payroll automation software. Since February of 2015 the company has added over 60K+ small businesses (~1% US SMB population). In June 2018, at the CB Insights’ Future of Fintech conference, Gusto CEO and co-founder Josh Reeves announced Flexible Pay, the company’s digital paycheck advancement service that allows employers to offer earned income to employees in advance of a traditional bi-weekly pay cycle. 2018 PARTNERSHIPS Accounting 401(k) Workers’ Compensation529 College Savings
  • 55. 5454 New investment platforms and asset classes # 6 O P E N I N G T H E M A R K E T F O R I N V E S T O R S & D I V E R S I F I C A T I O N
  • 56. 55 Fintech is democratizing investing A L T E R N A T I V E A C C E S S T O I N V E S T I N G The first wave of investing apps lowered the barriers for investors to access existing markets with tech. A C C E S S T O N E W A S S E T S Startups are now looking to lower barriers to enter alternative asset classes and creating new commercially available assets. N E W I N V E S T I N G M O D E L S T O T A P E X I S T I N G A S S E T S In tandem, startups are creating next-gen investment platforms that are focused on creating new methodologies to access alternative asset classes. 1 2 3
  • 57. 56 Alternative investment apps will continue to rise in prominence among next-gen investors BROKERAGES MARKETPLACES 1 PLATFORMS
  • 58. 57 New investment models will be created to open up markets and create asset classes CARS MUSIC MUNICIPALITIES ART 2 MARINE Last Round: $7M Series A Sep’18 Investors: Social Leverage, Anthemis Group, Upfront Ventures Last Round: $12.8M Series A Jan’18 Investors: Greycroft, FJ Labs, Saturn Partners, The Raine Group Last Rounds: Undisclosed Last Round: $3.37M Series B-II Nov’18 Investors: Grotech Ventures, Techstarts Last Round: $25M Series B May’17 Investors: 8VC, Abstract Ventures, Sound Ventures, Fintech Collective, Village Capital
  • 59. 58 Startups borrowing existing biz models to open up real estate investing to retail investors F O R R E T A I L I N V E S T O R S Crowdstreet is a US-based marketplace that connects accredited investors, family offices, and institutions with sponsored commercial real estate projects. Crowdstreet leverages a crowdfunding model to connect investors to co-invest with developers. Crowdstreet’s investors have deployed $350M across 250+ properties. Last Funding $8M Series B (Jul’18) // US Lendinvest is a marketplace property lender that uses a P2P model to connect borrowers with bridge and rent-to-let financing. Retail and institutional investors are then able to invest in LSE listed bonds securitized from the loans. Lendinvest has lent $2B and helped borrowers buy, build, and renovate 5,000+ properties. Last Funding Series C // London PEER-TO-PEER CROWDFUNDING Alphaflow automates real estate investing by leveraging a robo-advising model to generate passive income-producing portfolios. The company launched in January 2016 and has $17.32M of assets under management Last Funding $1M Convertible Note// US ROBO-INVESTING 3
  • 60. 5959 Fintech meets real estate # 7 F I N T E C H D E E P E N S R O O T S I N T H E R E A L E S T A T E E C O S Y S T E M
  • 61. 60 Real estate tech is expanding rapidly *Note: Real estate tech is a broad vertical and includes companies outside of fintech 2018 saw the tech landscape in real estate expand Deals flowed across the commercial and residential real estate markets. Broad investment themes included platform-ification, digitization, and portfolio optimization. 2019 will see these companies look to take advantage of consumer demand and supply of residential properties, and investor demand for portfolio exposure and diversification.
  • 62. 61 Mortgage debt dwarfs all others categories $1.25T $1.4T $850B $9T Source: FRBNY
  • 63. 62 First, fintech startups digitize the mortgage lifecycle and created alternative lending platforms
  • 64. As home values rise, fintech is moving into home equity HELOC Equity sharing / reverse mortgage Rent-to-own Last funding round Total disclosed equity funding Select Investors $40M Series B (6/27/18) F-Prime Capital and Citi Ventures $92.84M waitlist $50M Series A (4/30/18) $50M Ribbit Capital, DCM Ventures, and CreditEase Fintech Fund $12M Series A (5/23/18) $12M American Family Ventures and General Catalyst Unattributed (4/18/18) $8.65M Andreessen Horowitz and Ribbit Capital $3.5M Seed VC (9/19/18) $4.7M Blumberg Capital and Montage Ventures $1.3M Seed VC (10/23/17) $1.3M IA Ventures and MetaProp NYC $1M Seed VC (4/26/18) $1.12M Kima Ventures and Techstars Ventures
  • 65. 64 And abstracting away the mortgage as startups look to make cash offers for home buyers F L Y H O M E S R I B B O N Seattle-based Flyhomes launched as a brokerage and provides a program to make cash offers on behalf clients. FlyHomes is expanding into new lines of business to deal with mortgages, title and escrow, repairs and renovations and more. New York-based Ribbon, which operates in the Carolinas, works with homebuyers and their real estate agents to provide home sellers with a guaranteed sale, and all-cash offer regardless of where buyers are in the mortgage process.
  • 66. 65 Rent-to-buy: Startups look to enable gradual home equity ownership D I V V Y H O M E S V E R B H O U S E San Francisco-based Divvy allows renters to put down 2% of the price of a desired property, which Divvy buys and leases back. 25% of the monthly price goes toward home equity, with 70% going toward rent, and 5% toward a maintenance fee. San Francisco-based startup Verbhouse operates a lease-with-an- option-to-purchase program in the Bay Area that lets program participants move into homes now with the option to buy later.
  • 67. 66 Fintech is integrating home insurance deeper into the home buying process Lenders using Blend Labs represent more than 25% of the total US mortgage market with $60B in mortgage applications flowing through its software in 2017. Blend launched a home insurance agency in August 2018. Source: Andreessen Horowitz, “Making Sense of Mortgages,” Blend Labs, CB Insights analysis
  • 68. 67 Startups look to disrupt the $15B title insurance market R E A L E S T A T E M E E T S F I N T E C H In December 2018, States Title acquired North American Title, the eighth largest title writer in the United States by market share. States Title hopes to use data and technology to predict and risk and severity of a title defect on particular properties. New York-based startup Spruce is a digital title insurance and escrow agency. Spruce has worked with lenders and real estate companies in 36 states and plans to be in 48 states by the end of 2018. Qualia provides cloud workflow technology to the title, escrow, and closing process. Clients include Stewart, First American, and Fidelity National. As of March 2018, 5% of the national real estate market was transacted through Qualia.
  • 69. 6868 Rise of impact fintech # 8 T H E “ G R E E N ” S T A N D A R D O F I N V E S T I N G
  • 70. 69 “Going green” is not new, but there is renewed demand driving how ESG scales S U S T A I N A B I L I T Y I S A G L O B A L P R I O R I T Y Tech companies are jumping to head off concerns over the health of the environment, sustainability, and corporate governance (ESG). Upcoming initiatives will turn up the heat on companies to prove countries are progressing positively. M A R K E T S & E C O N O M Y Tech companies are tapping into the ESG and impact investing space which have seen an uptick in inflows and are gaining traction among economists and investors. Market volatility could drive more inflows into impact investments and position impact fintech firms to bring standardization to investment criteria. D E M O G R A P H I C S H I F T S Startups are creating next-gen wealth management platforms for the next generation of investors who increasingly want investment portfolios that align with their values. To grow distribution and increase engagement, fintechs with scale could look to tap into ESG and impact investing. 1 2 3
  • 71. 70 Impact investing and ESG are on the rise News mentions of “impact investing” and “ESG” (environmental, social, and governance), 2014 – 2019 YTD
  • 72. 71 Global sustainability goals will be top of mind for policy makers, but measuring progress is subjective Moderate movement to goal Moderate movement away from goal People killed in road accident Recycling rate of municipal waste Sustainable Transport Adverse environmental impacts Measured against: United Nations 2030 Agenda For Sustainable Development Goals (SDGs) In 2015, the UN committed to implementing Sustainable Development Goals (SDGs) that outline 17 global goals each nation has pledged to work towards by 2030. However, each goal and underlying initiatives are open to interpretation and carry different weights of importance across regions. Measuring progress towards goals is complex, lacks accountability, and is an area global leaders will demand transparency from officials tasked with implementation and governance.
  • 73. 72 Quantifying progress and impact is subjective because there is no “gold standard” of green data VS.
  • 74. 73Source: 2016 GSIR Despite subjective nature, investing in impact funds is growing 2018 saw ESG and impact portfolios gain academic recognition for their ability to generate alpha. Strategies that intentionally exclude certain sectors, companies, or practices are gaining traction with younger demographics. As of 2016, global sustainable investment assets reached $22.9T 2014 & 2016 ($T)
  • 75. 74 With $30T from the ‘great wealth transfer,’ millennials will expect choices that have a positive ROI & impact Millennials are 2X more likely to make sustainable investments than the average investor. Source: Survey conducted by Morgan Stanley released in August 2017 86% Are "very Interested" or "interested" in sustainable investing 75% Think their investments can influence climate change 61% Have made at least 1 sustainable investment action in the last year
  • 76. 75 The first layer of impact fintechs are establishing green data credibility for financial services firms D A T A > O P I N I O N DATA INTEGRITYADVISORY CREDIT RISK REAL ESTATEINVESTING Allows advisors to conduct negative and exclusionary screening Auto rebalances portfolios to align with social impact goals Provides scoring and reporting for for non- quantifiable risk events Platform for scoring and monitoring environmental outputs of RE assets AI database that tracks, quantifies, and reports intangible risk for equities
  • 77. 76 The next layer of impact fintech will establish credibility with next-gen investors, ahead of wealth transfer BANKING INVESTING LENDING Digital-first banks that use impact investments to generate interest on deposits and savings Automated wealth management software that allocates assets across thematic investment funds and ETFs Investment account that allocates assets to community development financial institutions (CDFIs)
  • 78. 7777 Lack of fintech M&A by banks continues # 9 D E S P I T E N E W C H A L L E N G E R S , B A N K S L O O K T O B U I L D R A T H E R T H A N B U Y
  • 79. 78 European banks are challenging back In H1’18, competition between high street banks and well-funded challengers continued to heat up. While incumbents look to boost their digital capabilities, challenger banks are growing market share and their global footprint. As predicted, fresh off mega- round ($100M+) investments and unicorn designations, N26, Monzo, and Revolut all announced plans build out their US operations. VS. 2 . 3 M C L I E N T S 3 M C L I E N T S 1 M C L I E N T S Santander latest traditional player to open digital bank May 15, 2018 |
  • 80. 79 RBS hatches plan to create digital challenger bank to face off the threats from startups like Monzo and Starling Bank March 19, 2018 | 2018 saw banks launch a wave of digital products
  • 81. 80 But while banks continue to embrace mobile banking…
  • 82. 81 ..incumbents still miss on mobile UX/UI, a key to acquiring and engaging next-gen customers US IOS App Store ratings (out of 5) VS. 2018 Peak: #1 overall
  • 83. 82 • Regulatory barriers, legacy tech infrastructure, cultural barriers and reluctance to carry inflated goodwill (intangible assets) values on balance sheets pose challenges for incumbents looking for fintech startups • 20 fintechs have been acquired by banks • Goldman has been the most active with their biggest announced acquisition being of PFM app Clarity Money in April 2018 Banks will remain trigger shy on acquisitions 2013 – 2019 (01/12/2019)
  • 84. 8383 No-go for fintech IPOs # 1 0 F I N T E C H I P O S F A I L T O M A T E R I A L I Z E I N 2 0 1 9
  • 85. 84 CHINA UNITED KINGDOM UNITED STATES INDIA SWEDEN NETHERLANDS NORTH AMERICA EUROPE ASIA 2018 started the year with 25 unicorns valued at $75.9B Global VC-backed fintech companies with a private market valuation of $1B+ (01/01/2019) $1.79B Valuation $1.3B $1B Valuation $1.46B $1B $18.5B $7B $1.1B Valuation $2.3B$2.5B$1B $1.56B $1.4B $1B $1.2B $9.2B $1B $1.9B $2B (as of Q2’15) $2.7B $4.5B $2.4B (as of Q4’14) $3.6B$3.5B $1B
  • 86. 85 CHINA INDIA SWEDEN NORTH AMERICA EUROPE ASIA Despite hype, only three fintech unicorns went public Global VC-backed fintech companies with a private market valuation of $1B+ (01/01/2019) $1.79B Valuation $1.3B $1B Valuation $1.46B $1B $18.5B $7B $1.1B Valuation $2.5B $1.56B $1.4B $1B $1.2B $9.2B $1B $1.9B $2B (as of Q2’15) $2.7B $4.5B $2.4B (as of Q4’14) $3.5B $1B GreenSky stock rises after several analysts initiate coverage with bullish ratings June 18, 2018 | UNITED KINGDOM NETHERLANDS $2.3B$1B $3.6B UNITED STATES
  • 87. 86 Adyen makes record public debut in Europe Netherlands-based payments processor Adyen saw shares jumped 98% on 1st day of trading Mkt Cap Euro 13.44B
  • 88. 87 Alternative lenders ‘bear’ market volatility Mkt Cap $2B (1/18/19) Mkt Cap $1.2B (1/21/19)
  • 89. 88 Record fintech mega-rounds will likely delay IPOs 2 0 1 8 S E E S R E C O R D G L O B A L F I N T E C H M E G A - R O U N D S ( $ 1 0 0 M + ) $1B+ (2) $500M+ (1) $300M+ (8) China US India UK Germany Brazil Hong Kong Australia Legend: $200M+ (10) $100M+ (31)
  • 90. 89 Stripe, the global payments provider, has been aggressively expanding its tech stack. The company plans to use the latest funding to expand into Southeast Asia and India. According to Bloomberg, Stripe sales are roughly $1.5B annually. Stripe supports businesses in 120 countries, payments in 130 currencies, and provides services ranging from fraud prevention to accounting. Stripe reports that 65% of UK internet users and 80% of US users have bought something from a Stripe-powered business. D E M O C R A T I Z I N G G L O B A L P A Y M E N T S A N D E N A B L I N G T H E D I G I T A L E C O N O M Y > I P O Last Funding $245M Series E // Sep’18 Valuation $20.3B ENABLING DEVELOPERS Stripe’s growing integrated technology stack for global money movement GLOBAL PAYMENTS & TREASSURY NETWORK SHIIPPING PRODUCT 2019 GOALS: CFO transitions to chief product officer, leaving the role vacant December 5, 2018 |
  • 92. 9191 $11.89 BILLION 659 DEALS U S F I N T E C H V C - B A C K E D E Q U I T Y F U N D I N G I N 2 0 1 8 : A C R O S S
  • 93. 92 US fintech funding hits 5-year high as $100M mega-rounds tops record North America VC-backed fintech financing trends, 2014 - 2018, ($M) $5.71 $8.81 $5.92 $8.18 $11.89 518 588 570 594 659 2014 2015 2016 2017 2018 Amount ($B) Deals
  • 94. 93 US fintech deals cross 5-quarter low, despite annual high US VC-backed fintech financing trends, Q4’17 – Q4’18, ($B) US deals and funding top a 5-year high Funding surged in 2018 on the back of 25 mega-rounds worth $5B. Q4’18 saw 10 mega-rounds, 3 of which minted new unicorns, Brex, Devoted Health, and Plaid. Other mega-rounds in the year boosted the valuations of established unicorns like Stripe, Robinhood, and Coinbase. $2.4 $2.4 $3.3 $3.0 $3.3 146 191 169 157 142 $- $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Amount ($B) Deals
  • 95. 9494 $22.65 BILLION 516 DEALS A S I A F I N T E C H V C - B A C K E D E Q U I T Y F U N D I N G I N 2 0 1 8 : A C R O S S
  • 96. 95 Fintech funding in Asia spikes to $22.7B on the back of $14B Ant Financial investment Asia VC-backed fintech financing trends, 2014 - 2018, ($B) $1.11 $5.03 $11.34 $6.20 $22.65 156 256 318 373 516 2014 2015 2016 2017 2018 Amount ($B) Deals
  • 97. 9696 $3.53 Billion 367 DEALS E U R O P E F I N T E C H V C - B A C K E D E Q U I T Y F U N D I N G I N 2 0 1 8 : A C R O S S
  • 98. 97 $1.20 $2.01 $1.38 $2.84 $3.53 144 234 262 371 367 2014 2015 2016 2017 2018 Amount ($B) Deals Fintech deals in Europe level off, as funding hits $3.5B in 2018 Europe VC-backed fintech financing trends, 2014 - 2018, ($B)
  • 99. 98 $375.01 $1,047.85 $558.27 $1,457.57 $1,514.68 61 110 88 139 114 2014 2015 2016 2017 2018 Amount ($M) Deals UK-based fintech rebounded despite pull-back in Europe UK VC-backed fintech financing trends, 2014 – 2018, ($M) UK fintech deals fall 18% in 2018 Brexit concerns may have contributed to a year-over- year decline in UK fintech financing rounds in 2018. Funding to UK-based fintech companies grew slightly on the back on significant investments to digital-first “challenger banks” Monzo and Revolut. Both became unicorns in 2018.
  • 101. 100 Company Deal Date // Amount Total Disclosed Funding (M) Select Investors Description May’18 // $14,000M $19,145M ($150B Valuation) Silver Lake Partners, General Atlantic, T. Rowe Price, Temasek Holdings, Sequoia Capital China, Warburg Pincus, & others China-based internet giant that provides a suite of financial services spanning payments, insurance, credit, wealth management, and others, through various subsidiaries including Alipay & Yu’e Bao Dec’18 // $1,350M $3,031M ($3.8B Valuation) Goldman Sachs, JP Morgan, UBS An internet lending and wealth management platform for SMB and retail consumers Jan’18 // $650M $650M ($1B Valuation) IDG Capital and SBI Group A spin-out from Ping An providing a platform for financial account management for SMBs. Jun’18 // $392M $569M ($1.2-$1.6B Valuation) Venrock, Goldman Sachs, GSV B2B data analytics suite of modular desktop and API applications that leverage social media to detect events, consumer signals, and alerts Dec’18 // $385M $1,451M CreditEase, Munich Re/HSB Ventures, SoftBank Group Auto lending and finance management platform Top 11 global fintech deals in 2018 The top 3 deals to VC-backed fintech companies were all mega-rounds ($100M+) in China
  • 102. 101 Company Deal Date // Amount Total Disclosed Funding (M) Select Investors Description Aug’18 // $375M $1.27B ($3.2B Valuation) Alphabet Tech-enabled health insurance carrier May’18 // $363M $539M ($5.6B Valuation) capitalG, DST Global, ICONIQ Capital, Kleiner Perkins Caufield & Byers, Sequoia Capital B2C digital brokerage and financial services platform that lets users invest in U.S. stocks, ETFs, options, and cryptocurrencies Jun’18 // $359M $536M Geo-Jade Petroleum Corporation, Shunwei Capital Partners Web-based investment portal that provides various debt-backed investments products for individual and SMB investors Aug’18 // $300M $3.07B ($10B Valuation) Berkshire Hathaway Mobile payments and commerce platform Oct’18 // $300M $368.95M ($1.8B Valuation) Andreessen Horowitz, F-Prime Capital, Premji Invest, Uprising, Venrock Digital health care company serving seniors, aiming to launch Medicare Advantage plans Oct’18 // $300M $538.67M ($8B Valuation) Andreessen Horowitz, Polychain Capital, Tiger Global Management, Wellington Management Crypto currency exchange, wallet, and platform for retail and institutional investing and transactions in digital currencies Top 11 global fintech deals in 2018 6 of the top 11 deals to VC-backed fintech companies were to US-based startups
  • 103. 102 The most active fintech VCs in 2018 By unique fintech company investments (new or follow-on) Rank Investor Select Fintech Investments 1 2 3 4 5
  • 104. 103 The most active fintech VCs in 2018 (continued) By unique fintech company investments (new or follow-on) Rank Investor Select Fintech Investments 6 7 8 9
  • 105. 104 Methodology CB Insights encourages you to review the methodology and definitions employed to better understand the numbers presented in this report. If you have any questions about the definitions or methodological principles used, we encourage you to reach out to CB Insights directly. Additionally, if you feel your firm has been under-represented, please send an email to info@cbinsights.com and we can work together to ensure your firm’s investment data is up to date. What is included: What is excluded: ― Equity financings into emerging fintech companies. Fundings must be put into VC-backed companies, which are defined as companies who have received funding at any point from venture capital firms, corporate venture groups, or super angel investors. ― Fundings of only private companies. Funding rounds raised by public companies of any kind on any exchange (including Pink Sheets) are excluded from our numbers, even if they received investment by a venture firm(s). ― Only includes the investment made in the quarter for tranched investments. If a company does a second closing of its Series B round for $5M and previously had closed $2M in a prior quarter, only the $5M is reflected in our results. ― Round numbers reflect what has closed — not what is intended. If a company indicates the closing of $5M out of a desired raise of $15M, our numbers reflect only the amount which has closed. ― Only verifiable fundings are included. Fundings are verified via various federal and state regulatory filings, direct confirmation with firm or investor, or press release. ― Previous quarterly VC reports issued by CBI have exclusively included VC-backed rounds. In this report, any rounds raised by VC-backed companies are included, with the exceptions listed. — No contingent funding. If a company receives a commitment for $20M subject to hitting certain milestones but first gets $8M, only the $8M is included in our data. — No business development / R&D arrangements, whether transferable into equity now, later, or never. If a company signs a $300M R&D partnership with a larger corporation, this is not equity financing, nor is it from a venture capital firm. As a result, it is not included. — No buyouts, consolidations, and/or recapitalizations. All three of these transaction types are commonly employed by private equity firms and are tracked by CB Insights. However, they are excluded for the purposes of this report. — No private placements. These investments, also known as PIPEs (Private Investment in Public Equities), are excluded even if made by a venture capital firm(s). — No debt / loans of any kind (except convertible notes). Venture debt or any kind of debt / loan issued to emerging startup companies, even if included as an additional part of an equity financing, is not included. If a company receives $3M with $2M from venture investors and $1M in debt, only the $2M is included. — No government funding. Grants, loans, or equity financings by the federal government, state agencies, or public-private partnerships to emerging startup companies are not included.
  • 106. 105 WHER E I S ALL THI S D ATA FR OM? The CB Insights platform has the underlying data included in this report CLICK HERE TO SIGN UP FOR FREE